Purpose: To help you understand the importance of cash flows in the operation of a small business.You’re having a tough time figuring out why your actual cash is always coming up less than the amount that the general ledger says should be there. You would hate to think that any of your employees would be stealing from you, because they have all been with you since you opened the business five years ago. But maybe it’s time to do a little investigative work. After all, cash is the lifeblood of the business, and if it’s being misappropriated, you need to find out fast!You start to think back over some of the observations you’ve made recently and some of the conversations you’ve overheard, and one startling conclusion is staring you in the face. Joe’s been a good employee, but lately he’s been bragging about his wild weekends and some of the gambling casinos he’s been going to. Joe never used to be like that. You overheard one of his fellow employees ask him where he’s getting all this money, and he said that his wife just got a really good raise at her job and they’re celebrating. Then just last week, Joe drove to work in a new sports car and again you overheard him tell someone about the great deal his brother-in-law got for him on this car.Joe is in charge of billing and collecting. Since your office is so small, you always felt like these two jobs could be done more efficiently by the same person. You also remember that Joe’s uncle is one of your vendors and there was that situation last year where you discovered a double billing to his uncle’s company. When you brought it to Joe’s attention, he immediately admitted his error and took care of it.

Requirement1. Respond to the following: You are wondering whether or not you should call Joe into your office and have a talk with him, or just observe a little bit more to see if you can discover any irregularities in Joe’s area.